The Trick Charlie Munger Uses To Make Better Decisions

With all the things we have to distract us in the world, how can we be better at simply making judgements, and thinking about how to solve things. I can tell you that understanding one key concept can make all the difference in the world.

The Trick Charlie Munger Uses To Make Better Decisions

﻿

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Hey there it's David H Lawrence the 17th and today's heroes are a familiar name I think to some of you and an unfamiliar name to most of you. The familiar name is Charlie Munger. If you don't know who Charlie Munger is, he's Warren Buffett's partner and has been his business partner for almost all of. Warren Buffett's life. And is kind of the guy in the background the guy that doesn't like to be well-known and everything but he's getting more and more well-known because he's brilliant. But the name that you probably don't know is Kenneth Krake. CRHI.K. Kenneth Krake. And he wrote a book he's actually a philosopher but he was fascinated with how. Humans think. Evaluate and explain things. And if you've ever wondered how people who always seem to make good choices are at least for the most part always seem to consider the right stuff. I have some intelligence about what they do don't make a lot of mistakes seem to be lucky. It's very likely that they follow what Kenneth Craig called the mental model. Now in the 40s he was thinking a lot about this. He wrote a book called The Nature of Explanation. And I would link to it for you here on the video but when I went to Amazon they used copies that they had of it were 663 dollars so I'm not linking to it I'm going to give you the Cliff's Notes version.

So what he considered and came to the conclusion of is that people that do a really good job of thinking about things coming up with great solutions and conclusions so on they use something called the mental model. Now that sounds like a pretty general thing but the way he described it a mental model is what you use. To compare. What is in reality. With what you think it should be. So the mental model is what you think it should be. What actually happens in reality. And if you look at those two things for all the different things that you're thinking about doing and saying and and so you know solutions and strategies and tactics. Because we're human and because we don't know everything we tend to make stuff up. We don't have the answer. Well it must be that. You know casting directors must tell everybody who to cast right. You know. I don't know all the things that I don't want to. I don't want to tip anybody off and say vaccinations cause diseases. I don't believe that. But there are people that do. So you know there's this thing called the mental model. Is. What you use. To look at reality and see if it jives with what you've been thinking. If it doesn't. It's worth looking into why and if it does it's worth relying on even if it's counter-intuitive. Charlie Munger has said that he uses this all the time and as I was reading it I realized I do most of the time I always think Is that really true. Is that really what happens. We talk a lot about this when we look at the habits that we create as performers and the things that we hear from other performers about how to get things done well right.

And how not to make mistakes and how to get booked and how to get auditions and how to find an agent and all that sort of thing. Well a good thing to do would be to create a mental model and then compare it with actual facts. Not what you think is fact. And that ties in with how to be a world class complainer you know post what you know not what you think you know and post what you know is true has been proven to you. You know it's true not it must be true. Right. So the nature of explanation is the book maybe you can find it cheaper somewhere. It's worth reading. It's written in a kind of 1940s style. So be aware of that there's some some sample pages on Amazon. But if it's good enough for Charlie Munger it's good enough for me to look into and as I was thinking about how I think of things I thought Huh that's pretty close to what I do. So I thought maybe would help you. So Kenneth Krake is the guy's name the nature of explanation Charlie Munger is is Warren Buffett's partner and he seems to have done fairly well for himself. I think that kid's gonna make something of himself someday. Listen if you have any questions about this if this resonates with you or if it doesn't resonate with you I just throw darts at the wall and see what hangs on the target. Let me know. It's cool.

I mean you can disagree with me if you want to give me an alternative but if what I'm talking about also resonates with you if it if it kicks for you let me know that too in the comments below.

Author: Jacob WolinskyJacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. -
Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own 2.5 grams of Gold